Turkish base oils demand low – legislation causing confusion

LONDON (ICIS)--Turkish base oils demand is low because of legal restrictions at ports and new legislation, and is not expected to improve until the second half of January 2014, sources said Tuesday.

“There is so much uncertainty and nobody is buying. I won’t be doing anything until the second half of January, when it is more clear what is going on,” said a buyer of base oils for the Turkish market.

A second buyer said it too would not be doing any business until late in January.

“I will not be doing any business until late January because of the port restrictions,” the buyer said.

Buyers have been pulling back their activities in the Black Sea ahead of new government legislation regarding imports of base oils to Turkey due to be implemented from 1 January 2014.

Under the new legislation, base oil importers will need to apply to the EPDK (Republic of Turkey Energy Market Regulatory Authority) for base oil cargoes planned for the country.

Licences will be issued according to buyers’ finished-lubricant production capacity, and the amount of base oils they already hold in stock. Only lubricant producers will be able to apply for the licences, but base oil traders will be able to use them on behalf of the buyer.

The legislation was due to be implemented in July this year but this was delayed in order to give buyers and sellers more time to prepare the necessary paperwork.

“Yesterday the government issued a new regulation saying even storage facilities have to pay all duties for oil and petrochemical products. This needs to be paid by the port,” said a base oils importer based in Turkey.

“Importers already pay the taxes upfront and get refunded – they will now pay three times the amount of tax – the port which handles the goods need to pay the deposit,” the importer added.

In terms of domestic supply, there is enough local availability to met the current level of demand in the short term, sources said.

“We don't know what is going to happen in two weeks from now – can't book a cargo – we have said the same to our suppliers – we are just waiting. However, we have product in tank that all of a sudden will become very valuable,” said an importer.

“The situation is not complicated – it's just unclear. There is no clarification – no explanation – I have heard from a couple of suppliers who want to sell – we have some suppliers that are really important to us,” the importer concluded.

According to sources, traders are now unable to bring in any material into Turkey because of a new ruling relating to base oil traders selling material from bonded warehouses on an ex-tank basis.